A generation of disaffected directors is growing within top investment banks. Promotions continue and some bonuses are still being paid, but for many it is not enough. The years when it was easy to move quickly up these institutions have well and truly passed and for those who remain, morale is at a low.

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Headhunters and junior and senior members of staff at banks agree that directors – those typically with 10-15 years’ experience – have become the industry’s “lost generation”.

One director, who has been working at a large US investment bank for nine years, told Financial News that frustration has been growing since the financial crash as it becomes clear that banks no longer need to promote people to keep them.

“It’s not like they’ve got 10 offers from elsewhere. Pre-crisis, you’d promote bankers to prevent them being poached,” he said, adding that the “star culture” which once focused on individual talent has now disappeared as banks take “a team approach” to potential promotions.

A director with 14 years' experience, who recently left a large investment bank for a more hands-on role at a boutique, reiterated that the old model of working for three years as a VP and three years as a director before being made MD had long gone.

He said: "If you're in a seat that generates $20 million to $25 million, then you're in line [to become] MD. And the people who are fast-tracked are the ones who have done a $50 million trade in a year. But those are not easy trades to come by."

As a result, the fanfare surrounding the promotions process has disappeared, according to another director with 14 years' experience who also works at a US investment bank. He added that the process has also become very political now that there are so few slots up for grabs.

"In years gone by, our existing MDs would have gone into a room and a list of names would have been called out one by one – there would have been a ceremony and people would have clapped," he said. "Now, there's so few [promoted] that an email just goes round. The fanfare and ceremony has gone. As a candidate it is frustrating and, because there's only one or two [slots] a year, it creates political issues – the cat-fighting becomes scratchy if there's fewer slots. People fight harder and dirtier."

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Those at smaller outfits face the same issues. A director at a small to mid-cap bank who has 14 years’ experience said some of the top revenue producers at firms like his are still directors – something which would have been unheard of a decade ago.

“There is huge frustration and that’s why you’re getting lots of people moving in-house – a bit of a glass ceiling has been put there,” he said. “If I was talking to my friends, I’d say that they [banks] are actively looking not to promote people. The reason isn’t pay; it’s that they don’t have people leaving at the top. When I started you didn’t have lots of guys in their 50s and 60s still working.”

Are you a banker stuck half way up the promotion ladder? Email reporter lucy.burton@dowjones.com with your thoughts. (Names will not be published without permission.)

Senior bankers in the UK and US – the MDs often put in charge of these promotions – say there is a logjam created by a chain of problems that began with the financial crisis.

"The financial crisis hurt people financially in a very big way, it took years off of salaries," said one global co-head, who asked not to be named. "So there's a practical net worth crisis, which of course is unpopular to talk about, but it means people want to refill their coffers and stay MD for longer."

The director at the mid-cap bank agreed, saying that before the crisis there would have been about 50% churn among MDs over a three- or four-year period. "Now that number is 5%," he said.

As those at the top stay put, the rank of directors grows with each passing year and the hierarchical pyramid has changed shape, according to Greenhill & Co chief executive Scott Bok.

"In every up cycle the big banks build up huge teams as they think there's so much business to do, and so they end up with a fat pyramid at this level," Bok said. "Then in every downturn banks look around and say, 'wow look how many VPs and directors we have – these people are very expensive and there's not much business to do – so let's just get our MDs to work directly with the juniors and lower the cost'. And they just wash those people out in huge numbers."

Some MDs added that many directors are no longer much more experienced than vice-presidents, as many VPs joined the sector just as deal activity trickled back to life. This means directors are not necessarily as highly valued, because some of their juniors have comparable skills.

Kevin Costantino, a Greenhill president based in New York, said bankers who started their careers 10 years ago “have worked through a lot of years which were down M&A years, so they could have as much experience as a VP who started in 2009 [when activity increased]."

That sentiment is also echoed by those working outside mergers and acquisitions, with one equity capital markets head pointing out that "vice-presidents today have had extraordinary experience across M&A, equity and leveraged finance. When today's directors were VPs, it was not a pretty picture."

Greener pastures

Many directors are hoping to jump ship and get a better deal elsewhere.

Costantino said: "We're certainly seeing a lot more résumés from director folk, and it's not just those who are being cut. It's also those who have seen their compensation go down."

However, headhunters said banks are not very interested in hiring at this level. Richard Hoar, a director of finance at London recruiter Goodman Masson, said associates and junior to mid-level VPs are "worth their weight in gold" in the eyes of the investment banks, while senior MDs tend to be viewed as valuable as they often hold the key relationships.

However, director openings are few and far between: "Nobody is getting the director bump – nobody is hiring a [senior] vice-president to become a director, they're looking internally [to promote] or pushing them [directors] out. Junior and mid-level VP are where it will be at this year."

Jonathan Evans, chairman of City recruiter Sammons Associates, said: "Most banks have enough aspiring VPs and directors. The need is for ambitious and intelligent juniors for the grunt work and seasoned and profiled MDs with a ready-made portable franchise."

Another added: "There are only so many MD slots and people aren't retiring, so there are very few people banks can promote each year."

A fourth London headhunter went even further, saying: "Directors are not required in our world."

The result for the directors who spoke to Financial News is that the future looks bleak.

Although "heads of department manage your expectations pretty well", according to the director at the boutique, and guidance is given early over whether or not you're in for a promotion, frustrations still linger for him and his peers. He said: "You either move up or out in investment banking. And if you're not up, there's only one door."

Banks are well aware of the problem, a fifth recruiter points out, but can do little about it largely due to regulatory issues. When contacted by Financial News, the top 10 global investment banks by revenue declined to comment on whether or not they were dealing with this matter.

JP Morgan, however, said last month that it would bring an 'accelerated promotions program' previously only available in North America to its global offices, the Wall Street Journal reported at the time, meaning that top talent joining the bank now could technically rise to the ranks of MD within nine years.

But mid-level bank executives, for now, seem overwhelmingly negative about the prospects for those starting a career in the industry. In a Financial News survey taken last year, one investment bank executive with between 10 and 20 years of experience said: “Seriously consider alternative careers. The rewards are not what they used to be and regulation/compliance is overbearing.”

Another said: “Don't. Use your intellect to make money for yourself not shareholders. The margins are not there anymore.”